📏CPA EXAM PREP

Trade Receivables

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Question

Why is expected credit loss recognition relevant to HTM debt securities too?

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Answer

CECL applies broadly to financial assets at amortized cost.

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Question

What kind of assets does CECL cover besides trade receivables?

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Answer

Loans and HTM/AFS debt securities at amortized cost.

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Question

Why does CECL use a forward-looking loss estimate instead of waiting for probable loss?

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Answer

It recognizes expected lifetime losses up front.

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Question

What does CECL require at initial recognition of a receivable?

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Answer

An allowance for lifetime expected credit losses.

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